Communication, Acceptance and revocation in Contract Act, 1872
The Indian Contract Act is one of the oldest mercantile laws of our country. It is the main law which regulates contracts in India. Indian Contract Act gives contractual rights to the citizens of India. It gives rights, duties and obligations to the parties of the contract to help them to conclude the business smoothly. It is not important that you will encounter Constitutional, Company or IPC laws daily but you do enter every day into many forms of oral, written, implied and express forms of contracts. Indian Contract Act came into force on 1st September 1872 i.e many years before our independence, So this legislation was created by Britishers and has 266 sections. In 1930 they removed section 76-123 from this act and made a separate Sales of Goods Act again in 1932 the last part (Section 239-266) of this act was removed and a separate, Indian Partnership Act was introduced. In this paper we will discuss 1) Communication, 2) Acceptance and 3) Revocation in Indian Contract Act,1872 and the importance of these terms in the formation of a contract.
In 2(a) of Indian contract act,1872 explains that a person is required to make a proposal for initiation of any agreement. When the person signifies his willingness to do something or abstain himself from doing something then it is called proposal but willingness should be signified. Signified in this context means communicated. The proposal must be communicated to other people. Section 3 of the act talks about how the offer is communicated. It says the offer may be communicated by word of mouth, or by writing or conduct in a manner which has the effect of communicating the offer to the offeree. So we can infer that the communication can be Express or Implied in both ways you can signify your willingness to the offeree.
Express- When the offer is communicated or made by words of mouth or by writing. Implied – When an offer is communicated or made from the conduct of the party at that particular situation. When inference by the conduct of the party can be drawn from circumstances of the case . e.g. when you board any bus, by your conduct you undertake to pay the fare when the bus takes you to your destination, no matter if you made no express promise to do so.
Upton Rural District Council v/s Powell2 – In this case fire broke out in the defendant farm. Believing that he was entitled to the free services of the Upton Fire Brigade, summoned it. The Brigade put out the fire and claimed compensation for the services. It then turned out that the defendant was not within the free service zone. He was held bound to pay. The court said “the truth of the matter is that the defendant wanted the services of Upton; he asked for services of Upton and Upton, in response to that request, provided the services. Hence, the services were rendered on an implied promise to pay them”.
It is also important that offer should be communicated to person or persons, to whom it is made. Section 4 of the Indian Contract Act,1872 says that “the communication of the proposal is complete when it comes to the knowledge of the person to whom it is made. Therefore offer is not complete unless and until it is brought to the knowledge of the person to whom it is made.
NOTE -Acting in ignorance of an offer does not amount to acceptance of the offer.
Williams v/s Carwardine – The plaintiff, who knew that reward had been announced to be given to anyone who gave information leading to the conviction to be given to anyone who gave information leading to the conviction as an assailant for murder, gave the necessary information. While giving the information to, the plaintiff mentioned that she had given the information to ease her conscience. At that time, she did not intend to claim the reward. She, however, subsequently brought an action to claim the same. It was held that since the offer had been accepted with its knowledge, there was a valid contract and, therefore, she was entitled to claim the reward.
According to section 2(b)3: When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted becomes a promise. When the proposal is accepted it becomes an agreement. Parties do not become bound until the proposal is accepted. The acceptance can be express or implied.
2 (1942) 1 All ER 220 (Emphasis added).
3 Section 2(b), the Indian Contract Act, 1872.
Express- When proposal or acceptance is made in words, the promise is said to be express. Implied- When the proposal or acceptance is made otherwise than in words, the promise is said to be implied.
Note- The offeree is not bound to accept the offer. He is free to reject it or it gets lapsed if not accepted.
Till the time offer is not accepted both parties has no legal obligation and has full rights to reject it but once the offer is accepted there is no coming back both parties become legally bound to promise.
Essentials of valid acceptance
- Acceptance should be communicated by the offeree to the offeror.
- Acceptance should be absolute and unqualified.
- Acceptance should be made in some usual and reasonable manner unless the proposal. prescribes the manner of acceptance.
- Acceptance should be made while the offer is still subsisting.
- Acceptance should be communicated
The offeree must signify his acceptance or communicate it. The communication of the acceptance of that party to whom the offer is made is essential for a valid acceptance. The communication of acceptance can be through different mediums orally, by post, by phone, by messenger, by agent etc.
Powell v/s Lee4– Powell was one of the candidates for the post of the headmaster of the school. The board of Managers passed a resolution selecting him for the post. No communication about this was to Powell by the board. One of the members who was not authorized to communicate this decision by the board, acting in his individual capacity, informed Powell about his selection for the post. Subsequently, the Board Managers met again and decided to cancel the appointment of Powell and appointed another candidate Parkar, in Powell’s place. Powell sued lee, the chairman of the Board of Managers, for the breach of contract. It was held that since the resolution passed by the board was not communicated to Powell by the board or any authorized person on its behalf, it could not give rise to a contract.
4 (1908) 99 L.T. 284.
- Acceptance should be absolute and unqualified
Also, it must be communicated in a prescribed manner. If no prescribed manner is described then it must be communicated in the normal and reasonable manner, i.e. as it would be in the normal course of business. Implied acceptance can also be given through conduct of that person, etc.
However, the law says silence is not a form of acceptance. So the offeror cannot say if no answer is received the offer will be deemed as accepted.
- Acceptance should be expressed in the usual/prescribed manner
According to section 7(2), The acceptance should be expressed through reasonable or usual manner unless the manner as prescribed in the proposal the way it should be accepted.
Usual and reasonable manner – The manner used in a particular type of business or according to the general custom of trade. LIC of India v/s R Vasireddy5– In this case, the encashment of a cheque of the first insurance premium or mere delay in conveying the acceptance of the proposal did not mean its acceptance. In case the formal internal procedure of approval of the proposal by Divisional manager has yet to be gone through, the contract does not arise until the same is done. Therefore, if the proposer died before the needful was done, his widow could not claim the assured amount of Rs 50,000/-.
- Acceptance should be made while the offer is still subsisting
5 A.I.R. 1984 S.C. 1014.
You can an offer only when the offer is not withdrawn, lapsed or revoked due to certain circumstances. Therefore the acceptance must be made when the offer is alive or subsisting. Similarly, the offer is considered ended by the rejection of the original offer or counter offer. As soon as acceptance is done the contract becomes complete.
3) REVOCATION OF OFFER
When the offer is accepted it creates legal obligations between parties but before the acceptance offer can be revoked.
According to section 5: “A proposal may be revoked at any time, before the communication of its acceptance is complete as against the proposer, but not afterwards.”
Note- Once the communication of acceptance is complete and a contract has come into existence, the question of revocation of offer does not arise.
Modes of revocation of offer
Section 6 talks about various methods through which revocation can be done.
- by notice of revocation
- by lapse of time
- by failure to fulfil a condition precedent
- by death or insanity of the offeror
- By notice of revocation
A proposal may be revoked by communication of notice of proposer of other party but notice should be communicated by the proposer ( or by agent ).
Note- In India, the proposer has to communicate through a notice of revocation but in England, even the offeree comes to know about revocation then the offer will be revoked. Dickinson v/s Dodds6 – this case is an authority for the rule that the revocation of the offer was valid even though the fact of sale of the property to somebody else was communicated to Dickinson by somebody other than Doods or his authorized agent. Another point explained by this case is that even though Doods originally stated that the offer was open till 9: 00 am. On 12 june , he was still free to withdraw this offer at any time before it was accepted because no legal obligation is created until the offer is accepted.
6 (1876) 2 Ch. D. 463.
- By lapse of time
If time is prescribed in the proposal for its acceptance then it should be accepted within that prescribed time otherwise the offer will be revoked and if no time is prescribed it should be accepted in a reasonable time. Non-acceptance within fixed time will automatically revoke the offer.
- By failure to fulfil a condition precedent
When the offer is made with certain conditions, such conditions needs to be fulfilled by the acceptor if not fulfilled the offer gets revoked. So the condition needs to be fulfilled by the acceptor before giving acceptance.
The State of M.P v/s Goberdhan dass7– In this case tenders for the sale of certain goods were invited subject to condition that 25% amount was paid when the tender was accepted. A’s tender was highest and the same was accepted, but he failed to fulfil this condition. It was held that no contract had arisen merely because A’s tender was accepted. Therefore , if A failed to take the goods and pay to them, he could not be made liable for breach of contract.
- By death or insanity of the offeror
When death and insanity of the proposer come to the knowledge of the acceptor before his acceptance then the offer gets revoked and if death and insanity don’t come in the knowledge of acceptor then it becomes valid acceptance.
Note- In England if the acceptor knows about offerors death the offer gets revoked no matter it was accepted or there was any legal obligation between them.
In re Irvine (Candian case )8, it has been held that even if the offeree, who has written his acceptance but not yet posted the same, dies , the offer lapses on his death, and the posting of the letter after the offeree’s death does not create a contract.
Authored By-: Ayush Ananad
7 A.I.R. 1973 S.C. 1164.
8 In re Irvine, (1928) 3 D.L.R. 268.